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Great post on audits. I have had experience attending audits with clients. The fear people have is by and large grossly overdone. As you say, the taxpayer controls the level of documentation that they have to support an entry on the return. Many people think they will be literally be thrown in prison, and refuse to take substantial legitimate deductions.

One client refused to take a maxed out Hope Credit for his daughter's educational expenses because he thought the amount would be noticed. I suspect, though that a seemingly irrational fear can sometimes be caused by other things that the taxpayer may or may not be doing in other areas, who doesn't want those things discovered, and fears that the claiming of a certain deduction will start a "fishing expedition" by IRS.
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